Guests and friends,

Ladies and gentlemen,

Good morning!  Let me start by thanking the organizer of this Roundtable for providing a high-level forum for exchange.  Taking this opportunity, I thank you all and other friends from both home and abroad for your gracious care, support and assistance to Sichuan after the devastating Wenchuan Earthquake on May 12th.  Needless to say, post-disaster reconstruction opens an opportunity for cooperation.  I hereby cordially invite you to post-earthquake Sichuan to see and feel for yourselves the tangible and unprecedented investment opportunities in the province.  I am also here to introduce you to my organization, Sichuan Foreign Invested Enterprises Service Center, and the opportunities arising from post-earthquake reconstruction.

I.Overview of Sichuan Foreign Invested Enterprises Service Center (SFIESC)

Sichuan Foreign Invested Enterprises Service Center (SFIESC) is a subsidiary of Sichuan Commerce Department that is charged by the provincial government with the specialized role of investment promotion and service.  It is the officially designated agency for providing one-stop services to incoming investors and occupies a vice-chairman seat in the Federation of Investment Promotion Agencies of China (FIPAC).

SFIESC is chiefly responsible for facilitating various government-sponsored investment promotion activities, providing investment advisory and project follow-up service for incoming investors, and servicing the ongoing needs of foreign invested enterprises.  The Center always proceeds from investor needs and assists investors and their investee companies to grow successfully in Sichuan with professional service.  This in turn contributes to further opening-up and overall social progress in the province.

Since its founding in 1992, the Center has advised investors of over 70,000 person times. Over 4,000 FIEs and institutions have opted for our flagship one-stop service, including 70% of the Fortune 500 companies in Sichuan.

On investment promotion: The Center brought in the single largest project by value into Sichuan province in 2005.  It was accredited by SQW of the UK and the International Financial Corporation (IFC) as an “excellent training partner”.  It has successfully organized sourcing fairs for GE and IKEA in Sichuan and spearheaded a strategy research project entitled “attracting foreign investors from eastern China for re-investment”.

On the one-stop service: The Center has provided high-quality service to over 500 FIEs, FIE subsidiaries and permanent representations on establishment, extension, change of circumstances and termination.  These FIEs include Samsung, Mitsubishi and Siemens.

On accounting and tax service: The Center has provided year-round accounting and tax service for the Sichuan subsidiaries of Fortune 500 companies such as HSBC, New York Life, Mitsubishi, Sumitomo, Emerson, Lucent, Shell and Nokia; tax service for the Sichuan subsidiaries of foreign trade agencies and business associations such as the Australian Trade Council, China-France Committee, China-Britain Business Council and Singapore Trade Development Board.  Heineken, Eli Lilly and Company, Wyeth, Manroland and some 100 other well-known businesses and institutions are also our premium customers.

On conference and exhibition service: The Center has participated in the design and making of the flower carts used for the celebration of the 50th Anniversary of the founding of PRC in Beijing.  We also contributed to the design and floor arrangement for the 1st Sichuan FIEs Achievements Show, Sino-French Economic Forum and the Sichuan Pavilion here at CIFIT.

On expatriate relocation service: We have provided individualized service for over 100 expatriates of well-known FIEs and foreign representations in Sichuan including Nokia, Microsoft, Siemens, Samsung, Singapore Trade Development Board, Thai Airways and China-France Committee.  The number keeps increasing year on year.

We have also successfully organized the 1st Sichuan FIEs Achievements Show and Sino-French Economic Forum as well as 90 other international and domestic investment promotion events.  In this process, we have developed a professional, customer-centered and experienced team.

Sichuan Foreign Enterprises Service Corporation (SCFESCO) is a state-owned company majority-held by the Center.  It specializes in providing human resource services for foreign firms and hi-tech industries.  It has a vice-chairman seat in the China Association of Foreign Service Trades (CAFST).

Drawing upon a reliable team and premier service, we have hosted the HR functions of a large and growing client base in western China (70% of the Fortune 500 companies in Sichuan entrust us for HR service).  We are also the first in the industry to employ an HR management information system built on office automation.  Our team members are professionally trained, insightful with policies, richly experienced and highly productive.  The company passed the ISO9001 quality certification in August 2005 with an IQ.net certificate.  We keep close and good relations with various government agencies.

The company offers the following key services: talent hunt, collective hire, campus hire, candidate testing and evaluation, recommendation, selection, recruitment ads, selection and management of the local staff of foreign as well as HK, Macau and TW companies, HR outsourcing for FIEs and domestic firms, expatriate relocation service and international labor service.

II.Damages Caused by the Wenchuan Earthquake and Progress of Post-disaster Reconstruction

On May 12th, a devastating earthquake took place in Wenchuan county, Sichuan province.  It registered the highest magnitude, widest coverage and largest casualty numbers since the founding of the PRC.  In Sichuan alone, 252,000 km2 of area was affected and the death toll probably exceeded 80,000.  More than 360,000 people are injured.  The province has suffered immediate economic losses of over 1 trillion RMB.  Houses and other infrastructure were severely damaged.  Over 10 million people were rendered homeless.  The towns of Beichuan and Yingxiu were almost razed to the ground.  21 expressways, 15 national and provincial highways and 2756 rural roads, bridges and tunnels were structurally damaged.  Power, telecommunication and water supply systems were largely paralyzed.  Government building, schools and hospitals also sustained heavy damages.

The recovery and reconstruction of the affected areas is a top priority anticipated by the affected people, concerned by all Chinese people and watched by the international society.  We have full confidence in post-disaster reconstruction as we have strong physical infrastructure and markets from reform and opening-up, which provides the economic, technological and institutional framework for the reconstruction.  The selfless assistance from other regions, society-wide support and generous aids from the international community are also important supplements to this effort.  The experiences and lessons drawn from other earthquake-prone countries and regions also provide valuable references.  More importantly, the people in the affected areas have pulled themselves together and are working whole-heartedly in self-help, mutual support and redevelopment.  Their optimism and enthusiasm translate into continued momentum for rebuilding their homes.

Sichuan is conducting a review and developing the policy and program for reconstruction.  The review will assess the scope of the disaster, its damages and environmental implications.  The program includes a master plan for post-disaster restoration and reconstruction as well as 9 specialized subprograms on urban and township system recovery, public utilities building, productivity deployment, industrial restructuring, market provisions, eco-restoration, disaster prevention and mitigation and post-disaster land use.  The province is trying its best to resume industrial and agricultural production and restore transport, energy, water and power supply and telecommunication infrastructure in the affected areas.  It plans to recover or rebuild 15 national and provincial highways of 4,290 kms, other major connections of 715 kms, rural highway of 22,000 kms; rebuild telecommunications backbone network; rebuild shelter of 420,000 sqms; 5,000 telecommunications for mobile and smart phones; rebuild urban and rural power grids and damaged thermal and hydro power generation units, damaged coal mines; reinforce oil and natural gas fields and pipelines.

Take tourism as an example, Sichuan is a large tourist destination and the only Chinese province with tourism contributing to over 8% of GDP.  In 2007, Sichuan gained 120 billion RMB from tourism.  The earthquake has caused Sichuan over 50 billion RMB worth of losses in this category.  It has also been a blow to tourist confidence.  The disaster might have hit a few places, but its impact could not be underestimated.  When it happened, Sichuan’s tourism virtually stopped.  So restoring the confidence of foreign and domestic tourist is a daunting task for Sichuan.  It is useful to point out that the earthquake was only limited to the Longmen Mountain Range and hit only 10 counties with devastating force, while the whole province has 181 counties.  Also Sichuan has over 4000 tourist attractions, and only 360 were affected, not to mention most of these affected places have already recovered and resumed tourism.  By June 15, tourism had fully resumed in 13 cities (prefectures) and partially in 4 cities (prefectures) including Chengdu.  Jiuzhaigou and Huanglong also opened up before the Beijing Olympics.

As a result of the earthquake, Sichuan had recorded decreases in its production for May and June and also drops in major economic indicators.  After July, its economy saw a notable rebound.  As reconstruction rolls out, the flow of investment and consumer demand will substantially increase.  Sichuan will regain its economic drivers.  By August 12, 93.4% the affected industrial enterprises in the province had resumed production.  Agriculture maintained a good momentum and managed a slight increase in yields even in the time of disaster.  Over 92% of the commercial enterprises in the affected areas had also finished transitional recovery.

III.Implications of the Earthquake for Sichuan’s Economy

From an economic point of view, such a devastating earthquake is a double-edged sword for economic growth.  On the one hand, it has impaired social productivity.  On the other hand, the earthquake created needs for recovery, resettlement and reconstruction, hence great needs for investment.  When these investments materialize, they will have a pulling-up effect on the economy.

The earthquake has caused enormous causalities and monetary losses.  But these losses are largely reflected in the losses of human capital and the stock of properties, whereas GDP points to a particular economic flow.  The 21 worst hit cities and counties represent only 11.6% in Sichuan’s total GDP and 13.3% in terms of industrial added value.  In other words, Sichuan’s economy has not been shaken to the bone.  So the earthquake only had limited impact on Sichuan’s economic growth.  Notwithstanding huge losses in stock figures, the province has not been crippled in terms of productivity and growth fundamentals.  The fundamentals for socioeconomic development were not lost.  The investment climate remains relatively stable.  So it is responsible to argue that investing in Sichuan is perfectly safe.

IV.Post-disaster investment opportunities in Sichuan

It is also noteworthy that the earthquake has given rise to some new investment opportunities.  In particular, there are unprecedented opportunities for investing in recovery and reconstruction and industrial restructuring and upgrading.  Incrementally, post-disaster reconstruction might generate even greater investment demand, for infrastructure, housing, plants and other manufacturing and everyday life facilities.  Reconstruction will provide major opportunities for such industries as insurance, pharmaceutical, food and beverages, energy, building materials, non-ferrous metal, machinery and tourism.

The National Development and Reform Commission (NDRC) is now soliciting public comments on the State Overall Planning for the Post-Wenchuan Earthquake Restoration and Reconstruction.  In line with the draft plan, recovery and reconstruction will require an estimated monetary input of 1 trillion RMB, equivalent of Sichuan’s total GDP for 2007.

Sichuan has identified its overriding targets for reconstruction: basic recovery in 3 years; development and revitalization in 5 years and well-off for all in 10 years, and four basic principles: putting people and livelihood first; respecting nature and science; coordinated deployment and harmonious development; innovative mechanism and partnership for rebuilding.  To fully leverage policy support and guidance and to mobilize all parties in post-disaster reconstruction, Sichuan People’s Government promulgated the Opinions of Sichuan People’s Government on Policy Measures to Support Post-Wenchuan Recovery and Reconstruction on July 10, 2008.  The paper prescribed clear policy actions in, among others, fiscal, tax, financial, land-use, industrial, commercial, job creation, social security and food supply.  These policy actions are without doubt a vote of confidence for investors.

Visionary people and farsighted businesses from both home and abroad have come to Sichuan after the disaster for facts-finding, project negotiation and investment commitment.  Already on June 6, Zhejiang Lisen Cement Plant signed an agreement with the seriously-hit Shifang city for additional 1.2 billion RMB of investment.  Bank of Shanghai, Caterpillar (China) Holdings, Shanghai Wiselogic Investment Group, Zhejiang China Automobile Group, and Ruentex Kangcheng Investment Limited signed agreements totaling 6.43 billion RMB with Wuhou District of Chengdu alone.  By mid-June, Sichuan had attracted new industrial investment projects of 103, with a total value of 42.5 billion RMB.  27 new industrial projects funded by external investment have kicked off in the province with a total investment of 5.16 billion RMB.  Between May 12 and July 31, 78 new foreign invested enterprises were established in the province, registering a total investment of 1.32 billion USD and contractual FDI of 700 million USD.  27 FIEs each invested 10 million USD with a combined FDI of 660 million USD.

At present, Sichuan is working simultaneously on disaster relief and socioeconomic development through partnership in opening-up.  The CPC Committee and government of Sichuan attach great importance to hosting industrial shift and regard it as a long-term, consistent and strategic priority.  Sichuan has recently introduced a package of incentives to promote such an industrial shift, including fiscal and tax incentives, financial promotion and factors support.  These are highly valued policy incentives which provide strong policy backup for external investors.  Sichuan is working to build “one hub, three centers and four bases”.  It will build 6 new outbound railways and 8 inbound expressways; accelerate construction in Yibin Port, Luzhou Port, Chengdu Rail Container Terminal and Shuangliu Airport.  With a complete logistic network, Sichuan will be able to become a transportation hub with connections in all directions and transportation modes.  Sichuan will also move more quickly toward becoming a logistics center, commercial and trade center and financial center in western China that brings together capital, resources, talents, information and market, generates radiation and provides services.  It will build development bases for strategic resources, modern processing and manufacturing, innovation commercialization and agriculture deep-processing, so as to bolster local economic development.  At the same time, Sichuan is building on its soft power by enabling more effective administration, creating a level playing field, a fair and secure regulatory environment, a sanitary and culturally friendly urban-rural environment, and a business-promoting social ambience, so as to attract satisfied investors and promote prosperous business.

Conclusion

Sichuan has suffered the misfortune of a natural disaster, but the province has retained its inviting beauty.  Its people remain resolved on fast and scientific development.  Its policy on full liberalization and cooperation remains unchanged.  Its status as the largest western province has not been challenged.  Its market potential and investment opportunities are growing.  So Sichuan is still a land of vigor and vitality.  Its post-disaster reconstruction and socioeconomic development needs the great support and involvement of all relevant stakeholders.  We sincerely welcome investors to Sichuan for reconstruction, investment, business and common development.  To conclude, thank you again to all the distinguished guests and others for your support to and input in Sichuan’s disaster relief and reconstruction.

Thank you!